Fitch Upgrades Arch Capital's Sr Notes to 'BBB'; Assigns 'BBB-' to Proposed Pfd Issue.CHICAGO -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has upgraded its rating on Arch Capital Group, Ltd.'s (Arch) $300 million issue of 7.35%% senior unsecured notes to 'BBB' from 'BBB-'. Additionally, Fitch has assigned a 'BBB-' rating to Arch Capital Group, Ltd.'s (Arch) proposed issue of $100 million -- $150 million of series A non-cumulative perpetual preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. . Fitch's insurer financial strength (IFS) ratings on Arch's key insurance subsidiaries remain unchanged at 'A-'. The Rating Outlook is Positive. Fitch's decision to upgrade its rating on Arch's senior unsecured notes reflects the company's favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. operating trends and performance, especially in light of the large catastrophe-related losses incurred by the reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. sector in 2005. The upgrade also reflects favorable cash flow and earnings trends derived from Arch's diversified book of property/casualty business. Given Arch's cash flow characteristics and the regulatory environments the company operates in, Fitch believes it is appropriate to narrow the notching between Arch's IFS ratings and its ratings on debt instruments. This degree of notching is consistent with both Fitch's existing and proposed rating methodologies. Arch uses a moderate amount of financial leverage and on a run-rate basis generates strong interest coverage. At Sept. 30, 2005, the company's ratio of debt-to-capital was 11% and through the first nine months of 2005, its operating earnings-based interest coverage was 6 times (x). Fitch believes that Arch's proposed series A preferred stock issuance will result in a moderate increase to the company's equity-credit adjusted debt-to-capital ratio. Fitch's Positive Rating Outlook reflects Arch's moderating growth profile, and Fitch's corresponding heightened comfort with the company's underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. discipline and operating leverage Operating Leverage A measurement of the degree to which a firm or project relies on fixed rather than variable costs. Notes: The higher the degree of operating leverage, the greater the potential danger from forecasting risk. . The Positive Rating Outlook also reflects the company's maturing position in the highly competitive reinsurance sector. Entity/Type/Issue Action Rating/Outlook Arch Capital Group, Ltd. --Long-term rating Upgrade 'BBB'/Positive; --Senior unsecured notes due 2034 Upgrade 'BBB'/Positive; --Cumulative preferred stock Assign 'BBB-'/Positive. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
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